Senate reg relief bill mandates
NCUA budget hearings, comments
NCUA would be required to publish details and hold public hearings on its budget, and credit unions would receive more flexibility in business lending, under major regulatory relief legislation passed by the Senate this week.
On a vote of 67-31, the Senate Wednesday approved S.2155, the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” sponsored by Sen. Mike Crapo (R-Idaho). The nearly 200-page bill holds sweeping financial regulatory reform affecting not only credit unions but banks and other financial firms.
Key provisions in the bill for credit unions would:
- Require NCUA to annually publish details of and hold a public hearing on its budget, giving credit unions (and others) opportunity to comment. (Both NCUA Board Chairman J. Mark McWatters, and former Chairman Rick Metsger, have sponsored public “budget briefings” to collect input on their annual budget proposals.)
- Give credit unions more flexibility in business lending (by exempting one-to-four unit, non-owner occupied residential loans from a credit union’s member business loan (MBL) cap – essentially treating the credit union loans similar to those made by banks).
- Ease Home Mortgage Disclosure Act (HMDA) disclosure requirements (that is, for those that have originated fewer than 500 open-end lines of credit and closed-end mortgages in the previous two years).
- Provide credit unions with regulatory relief from various Truth in Lending Act (TILA) and TILA/Real Estate Settlement Procedures Act (RESPA) integrated mortgage disclosure rule provisions.
- Provide immunity to credit unions (and other financial institutions) and individuals from lawsuits for disclosure of financial exploitation of senior citizens.
- Clarify and streamline the process for establishing online banking accounts (such as by recording personal information from, and making a copy of, a driver’s license or personal identification card).
Other provisions that were included in the bill, and affecting other financial institutions, would:
- Raise the threshold at which banks are considered too big to fail to $250 billion from $50 billion (dropping about two dozen banks from the requirement, but keeping about one dozen under it).
- Ease compliance for community banks with less than $10 billion in assets with the “Volcker Rule,” which bars financial institutions from making certain kinds of speculative investments that do not benefit their customers.
- Allow smaller banks to file shorter financial reports with regulators, be examined less often (once every 18 months) and be released from some capital rules as long as they maintain a relatively high ratio of equity to assets.
- Require credit reporting agencies Equifax, Experian and TransUnion to freeze and unfreeze Americans’ credit reports for free.
- Bar student lenders such as Sallie Mae and Navient from declaring that a student loan is in default when a co-signer dies or declares bankruptcy.
The bill now heads to the House, which has previously passed a number of regulatory relief measures (including H.R. 10, the Financial CHOICE bill). Some House leaders have indicated an interest in amending the Senate bill with items from the CHOICE bill – or others, some which have recently passed the House (about 30 or so, according to reports) – to give the bill a distinctive stamp by the House. Financial Services Committee Chairman Jeb Hensarling, R-Texas, told a reporter Thursday that he’s not looking to merge the Senate bill outright with the CHOICE bill, but indicated he does want a conference with the Senate over its bill and pending House legislation.
As for President Donald Trump, The White House in a statement Wednesday said he “looks forward to discussing any further revisions the House is interested in making,” with a goal of “bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible.”
HOUSE ACTS TOO: TAILOR BILL REQUIRES RISK PROFILE CONSIDERATION …
Meanwhile, the House was hard at work on other legislation – including a measure that would require federal financial institution regulators to take into consideration institution risk profiles and business models when taking regulatory action. The bill was passed by the House Wednesday.
The “Taking Account of Institutions with Low Operation Risk Act of 2017” (TAILOR Act – H.R. 1116) would also require each regulator to “look back” at the regulations adopted in the seven years prior to the bill’s introduction in the House (Feb. 16, 2017), and ending on the day the bill is enacted into law, to apply the requirements of the bill onto those regulations. The bill (sponsored by Rep. Scott Tipton, R-Colo.) passed on a vote of 247-169.
In considering risk profiles of regulated institutions, the TAILOR Act would require the regulators, when considering new regulations, to: consider the risk profile and business models of institutions being regulated; determine the necessity, appropriateness, and impact of applying such regulatory action on the institutions, and; “tailor such regulatory action in a manner that limits the regulatory compliance impact, cost, liability risk, and other burdens, as appropriate, for the risk profile and business model” of the institutions.
The bill also requires regulators to address “other considerations,” including:
- the impact that such regulatory action, by itself and in the aggregate effect of other regulations, has on the ability of regulated institutions to serve evolving and diverse customer needs;
- the potential impact of examination manuals, regulatory actions taken with respect to third-party service providers, or other regulatory directives “that may be in conflict or inconsistent with the tailoring of such regulatory action” to limit compliance impact, cost, liability risk or other burdens;
- the underlying policy objectives of the regulatory action and statutory scheme involved.
Further, in proposing rules, the regulators would be required to disclose how the agency has addressed the considerations outlined. Beyond that, regulators would have to submit annual reports to the congressional committees (Financial Services in the House, and Banking in the Senate) on actions taken to tailor regulations under the legislation. Additionally, each agency would be required to testify before the committees on the reports submitted.
Additionally, the Federal Financial Institutions Examination Council (FFIEC) would be required to submit a report on the actions taken by its member regulators, and also testify before the panels.
Under the seven-year “look back” provisions, any agency that determines it needs to revise a rule following a review, the agency has three years to do so after enactment of the legislation.
The future of the bill may be linked to the Senate regulatory reform measure passed this week, perhaps becoming an amendment to that measure when it comes to the House.
… HR 4545 CREATES OFFICE OVERSEEING EXAM PROGRAMS
Material supervisory determinations by a federal financial institution regulator could be reviewed by a newly created federal office under legislation approved by the House Thursday on a vote of 283-133. The legislation, H.R. 4545 (the ‘‘Financial Institutions Examination Fairness and Reform Act,’’ sponsored by Rep. Scott Tipton, R-Colo.) also sets deadlines for federal regulators to hold exit interviews and issue financial examination reports to the institutions under their supervision.
The new office of Office of Independent Examination Review (OIER) would be led by a director appointed by the Federal Financial Institutions Examination Council (FFIEC), who would serve a five-year term (eligible to be re-appointed once for another five-year term). The director, and office, the legislation notes, would be independent of any federal agency member of the FFIEC (i.e., the federal banking agencies, the NCUA and CFPB). State financial regulators are also represented on the council.
The director may hire a staff; investigate complaints from financial institutions and others about examinations, examination practices, or examination reports; hold (at least) quarterly meetings; review exam procedures of the regulatory agencies to “ensure that the written examination policies of those agencies are being followed in practice and adhere to the standards for consistency established by the Council,” and; conduct “a continuing and regular review of examination quality assurance for all examination conducted by the regulatory agencies.
In setting deadlines for exit interviews and exam reports, the bill requires a federal financial institution regulatory agency to provide the final exam report no later than 60 days after the exit interview following the exam itself, or the “provision of additional information by the institution relating to the examination.” The exit interview would be required no later than the nine-month period beginning with the examination itself (although the regulator could extend that by providing written notice to the institution and the new OIER established by the legislation).
If a financial institution desires, it may request an independent review by the OIER of a material supervisory determination contained in a final report of examination.
The House turned down an amendment by Rep. Maxine Waters (D-Calif., and ranking member of the Financial Services Committee) to narrow the applicability of the bill’s additional appeal process to apply only to small community banks and credit unions (those institutions with under $10 billion in assets).
The bill now heads to the Senate for consideration.
NCUA OKS PROPOSALS TO UPDATE BYLAWS, DEFINE CONTRACTOR RULES
Proposals to adjust federal credit union bylaws, and another addressing procurement processes, were approved for publication by the NCUA Board at its March monthly meeting Thursday; both were issued for 60-day comment periods.
The bylaws proposal, according to agency staff briefing the board members, is intended to “streamline, clarify and improve” standard federal credit union bylaws. The impetus for the effort, staff members said, were comments by the agency’s Regulatory Reform Task Force, which the NCUA staff said recommended “wholesale changes to the standard bylaws” to reflect developments among credit unions over the past decade.
In remarks about the changes, NCUA Board Chairman J. Mark McWatters urged comments from stakeholders: “we have a clean slate right now,” he said. Board Member Rick Metsger urged stakeholders to peruse the last paragraph on page 12 of the proposal in suggesting bylaws changes. That passage urges commenters to “provide a brief statement regarding whether the FCU Act would permit such a change.”
In other action, the two-member board (meeting at agency headquarters in Alexandria, Va.) approved a proposal amending its procurement processes, particularly its “suspension and debarment procedures.” Those refer to the agency’s ability to define rules for how contractors will do business with the agency. In supporting the proposal, McWatters said it “seems unfair to suspend someone if they don’t know what the rules are; we need to say ‘here are the rules, we expect you to comply with them.’”
JUDGE HAS POINTED COMMENTS OVER MEMBERSHIP RULE IN HEARING
NCUA shouldn’t be permitted “to rewrite the statute” regarding field of membership, a federal judge told attorneys representing the agency and those for the American Bankers Association in a hearing this week in Washington. The hearing was held to consider requests from both sides for summary judgment in the lawsuit, which was brought by the bankers’ association last year against NCUA over the agency’s 2017 membership rules for credit unions. U.S. District Court Judge Dabney L Friedrich grilled the agency’s lawyers over rural districts and core-based statistical areas, including how the definition of rural districts should be derived and the NCUA’s process and authority to grant expansions. In questions during the hearing, Friedrich focused on two changes made by the agency, including a provision allowing all or part of a combined area to qualify as a field of membership as long as the population doesn’t exceed 2.5 million, and a second provision that increases the population limit for rural districts to one million. Both sides were ordered by the to submit additional documentation for their arguments, as the judge continues to consider the summary judgment motions.
SUMMARY OUTLINES INFO SOUGHT IN CALL REPORT UPDATING
Proposed changes to NCUA call reports will reduce roughly 40% of the account codes on the reports, and reduce the profile input by 20%, according to a NASCUS summary of the agency’s request for information (RFI) supporting efforts to modernize the reports. In the summary prepared by NASCUS Legislative and Regulatory Affairs staff, the proposal by the NCUA Board (issued at its January meeting) would also reduce the overall NCUA Profile input by about 20%. The NASCUS summary points out that the agency is looking for input in a number of areas, including: are account codes proposed for retirement still pertinent; what other codes should be retired (or consolidated); are the relocated account codes grouped logically; are the instructions adequate; what’s the lead time that credit unions need work with vendors to make changes to system supporting Call Report changes. Comments are due on the RFI by April 2.
BUREAU’S RFI LOOKS AT ADOPTED RULES; NOT HMDA REPORTING, PAYDAY LENDING
Adopted regulations and new rulemaking authorities are the latest topics for a “request for information” (RFI) – the eighth in the series of an expected dozen – issued by CFPB Wednesday – the eighth of the series of a likely 12. Comments are due in 90 days.
In the RFI, the agency said it seeks comments on whether it should amend any rules it has issued since the agency’s creation. The bureau also asks if it should issue new rules under new rulemaking authority provided for by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010.
However, CFPB drew a distinction between this RFI and one previously issued on the agency’s rulemaking authority. It also pointed out it is not interested in comments (at least at this time) on pending rules.
“The purpose of this RFI is to seek feedback on the content of the Adopted Regulations, not the Bureau’s rulemaking processes, implementation initiatives that occur after the issuance of a final rule, or the Inherited Regulations,” the agency wrote in its notice. “Also please note that the Bureau is not requesting comment on any pending rulemaking for which the Bureau has issued a Notice of Proposed Rulemaking or otherwise solicited public comment.”
“Adopted regulations,” the bureau said, include rulemakings adopted under federal consumer financial law and issued by CFPB since the designated transfer date in 2011, “including rules that were adopted pursuant to specific instructions from Congress.”
CFPB said the term also includes new rulemaking authorities given to the bureau by the Dodd-Frank Act under the federal consumer financial laws.
However, the agency said, it is not looking for feedback now on its 2015 rule under the Home Mortgage Disclosure Act (HMDA) — nor that rule’s subsequent amendments — or its 2017 rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans,” because “the Bureau has previously announced that it intends to engage in rulemaking processes to reconsider those rules.”
NOMINATIONS SOUGHT FOR CUAC, BUREAU ADVISORY COUNCILS
Applications for membership on three advisory bodies – including that for credit unions — to help inform the CFPB’s activities are being sought by the agency. Members on the advisory bodies – the Credit Union Advisory Council (CUAC), Consumer Advisory Board (CAB), and Community Bank Advisory Council (CBAC) – are selected by the CFPB director and include representatives of consumers, communities, the financial services industry and academics. The board or council can include members from depository institutions generally; the community bank and credit union councils can only take current institution employees, and institutions represented on the two councils must be $10 billion in assets or smaller and not be affiliates of larger institutions. Appointments to the CAB are typically for three years and appointments to the CBAC and CUAC are typically for two years. Applications will be taken beginning March 19; announcement of selections is expected in September, according to the CFPB.
NASCUS LEG/REG COMMITTEE LOOKS AT LEGISLATION, PENDING RULES
The NASCUS Legislative and Regulatory Committee met this week to discuss and consider the many bills moving through Congress recently, particularly their impact on the state credit union system. Additionally, the committee considered the state system response to NCUA’s proposed changes to quarterly call reports (see the item on the summary, above), as the association begins development of its comment letter on the issue. Other proposed and pending rules issued by NCUA were also discussed.
BRIEFLY: Bill would delay RBC; Another changes structure, name of CFPB; FCU under conservatorship; Summit 2018 early bird date on horizon
NCUA’s risk-based capital (RBC) rules would be delayed by two years under a bill introduced in the House this week by Reps. Bill Posey (R-Fla.) and Denny Heck (D-Wash.) If enacted, the rule’s implementation date would move from Jan. 1, 2019 to Jan. 1, 2021. Another bill introduced last year by Posey would outright repeal the RBC rule; the bill awaits further action in the House … Meanwhile, a bipartisan bill that would replace the CFPB director with a five-member board – and change the name of the consumer protection bureau — was introduced this week in the House. H.R. 5266, the Financial Product Safety Commission Act of 2018 (sponsored by Rep. Dennis Ross, R-Fla.), is backed by two sponsors from each of the two parties. The bill would rename CFPB the Financial Product Safety Commission, led by five commissioners, who would be appointed by the president subject to Senate confirmation. The individuals, the measure proposed, would have “strong competencies and experiences in consumer financial products and services;” terms would be five years, which would be staggered … A $4 million credit union in Chicago, with about 1,300 members, was placed into conservatorship by NCUA this week; the credit union remains open and serving its members. NCUA said that it took the action against Beverly Bus Garage Federal Credit Union because of unsafe and unsound practices at the credit union … Early bird pricing discounts end April 2 for the 2018 NASCUS State System Summit, set July 16-19 at the Disney Yacht and Beach Club in Orlando, Fla. The conference – the only national event which brings together state credit unions and regulators for mutual dialogue to chart the future of the state credit union system – focuses on the key issues facing the state credit union system, with discussion among system leaders from around the country – and networking opportunities with colleagues.
Patrick Keefe, firstname.lastname@example.org